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Portfolio composition(3 index etfs and 27 stocks):
Transactions:
Added more GDS(HK:9698) to 4.7%
Added more Xinyi Energy(HK:3868) to 2.96%
Added more ZA Online(HK:6060) to 2.95%
Added more C-MER(HK:3309) to 4.27%
Initiated a 1.22% position in Coinbase(US:COIN)
Sold Vanguard S&P 500 ETF(HK:3140) for 65% gain
Commentary:
I continue my strategy of buying the dip of higher conviction stocks in segments like specialized healthcare, Saas, Insurtech, Greentech. After China's antitrust fine on Alibaba, the worst seem to be over for the tech giant. The Chinese government may now continue to assert pressure on Tencent and Meituan next. Antitrust is a global function and is needed to improve corporate governance and competition.
Alibaba(HK:9988): Alibaba only gotten a 4% of revenue fine which is 2.8bil usd(max antitrust fine is 10% of revenue). Last quarter they made a profit of 12bil usd. So if this fine is the last of it, its actually a good news, better than what the market was expecting. More importantly its a non impact to the company. This 2.8mil usd fine is worth to pay because in exchange they get to access Wechat and force integration of their Alipay in Wechat ecosystem.
Another problem Alibaba now faces is Bytedance. It is scaling up its ecommerce arm via Douyin and Tiktok rapidly to compete with the incumbent. Also decentralized competitors like China Youzan and Weimob are growing rapidly to eat into Baba's market share.
Vanguard S&P 500 ETF(3140): Vanguard is leaving HKSE completely and is planning to delist all their etfs on HKSE. I am forced to sell all my S&P500 holding for a 65% gain. S&P 500 PE has reached 42.5x which is near the peak of the dot com bubble. It is maybe ideal to take profit and stay at the side lines for now.
Coinbase(US:COIN): Coinbase was recently direct listed on the Nasdaq. To me its a shovel for crypto. During the gold rush, those that sold shovels made the most money. Coinbase is not only a pure crypto exchange, but to me it is also a casino, a coin storage and a highly compliant brokerage. Yes there is some correlation to Bitcoin, but as long as there are volatility and transactions, they will make money.
Valuation wise, Coinbase is either extremely mispriced by the market or its currently at its peak revenue. I feel it is the formal. Cryptocurrency is still at its infancy, that is why Coinbase is experiencing such a massive growth in terms of topline, profit, retailer and institutional numbers and MAU. Coinbase top line has increased by more than 100% from 2019 to 2020 with a profit margin of more than 40%. Its 1st quarter 2021 revenue was 1.8bil which is more than their FY 2020 revenue of 1.14bil! That is some insane growth. Assuming 1Q revenue stays consistent throughout the year, price to sale ratio will be around 9x at 65bil market cap. That means a 9x p/s ratio for a company that has revenue growing at more than 400%.
Some cons are also quite evident. Coinbase high commission fees will go down overtime due to competition which will likely cause margin erosion. There is a need to watch how the company diversify its business to a more subscriptive one and be less reliant on transactions. The amount of institutional growth in the company is promising. Custody storage charges may play an important role in the future as they grow. More innovation is needed to dabble into disruptive technology like Defi.
I added a small amount at 320 and will continue to add if the price becomes more attractive.